• Econpile Holdings (Econpile) has received a letter of award of RM25mil from Berjaya Construction to undertake substructure works for a proposed block of 41-storey service suites at Jalan Imbi, Kuala Lumpur.

• The project will be carried out over 13 months from 6 Oct 2022, contributing total EBIT of RM2mil, with the bulk of earnings to be recognised in FY23F. Nevertheless, our forecasts are unchanged as this award is within our FY23F order book assumption of RM200mil.

• During our previous engagement with the company, Econpile said that the rising cost of building materials has already been accounted for in new tenders. We believe most building material costs have reached its peak in 2Q2022. We also expect labour shortages to ease over the remainder of 2022.

• We are also mindful of the huge local supply of high-rise residential, retail mall and office developments that have been completed or nearing completion, which could lead to weak prospects in property-related job wins for piling contractors like Econpile.

• On a positive note, Econpile may secure sizeable infrastructural jobs, potentially for the MRT3. Recall that the company received a RM43.5mil project to undertake bored piled works for the MRT2 back in 2016.

• Econpile currently trades at 13x FY24F PE, above our benchmark of 9x for small-cap construction stocks. Hence, we maintain our SELL call with a fair value of RM0.12/share based on FY24F PE of 9x.

Source: AmInvest Research - 5 Oct 2022